The Post‐Merger Performance of Acquiring Firms: A Re‐examination of an Anomaly

The Post‐Merger Performance of Acquiring Firms: A Re‐examination of an Anomaly ABSTRACT The existing literature on the post‐merger performance of acquiring firms is divided. We re‐examine this issue, using a nearly exhaustive sample of mergers between NYSE acquirers and NYSE/AMEX targets. We find that stockholders of acquiring firms suffer a statistically significant loss of about 10% over the five‐year post‐merger period, a result robust to various specifications. Our evidence suggests that neither the firm size effect nor beta estimation problems are the cause of the negative post‐merger returns. We examine whether this result is caused by a slow adjustment of the market to the merger event. Our results do not seem consistent with this hypothesis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

The Post‐Merger Performance of Acquiring Firms: A Re‐examination of an Anomaly

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Publisher
Wiley
Copyright
1992 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
D.O.I.
10.1111/j.1540-6261.1992.tb04674.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT The existing literature on the post‐merger performance of acquiring firms is divided. We re‐examine this issue, using a nearly exhaustive sample of mergers between NYSE acquirers and NYSE/AMEX targets. We find that stockholders of acquiring firms suffer a statistically significant loss of about 10% over the five‐year post‐merger period, a result robust to various specifications. Our evidence suggests that neither the firm size effect nor beta estimation problems are the cause of the negative post‐merger returns. We examine whether this result is caused by a slow adjustment of the market to the merger event. Our results do not seem consistent with this hypothesis.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1992

References

  • Measuring security price performance
    Brown, Brown; Jerold, Jerold
  • Does the stock market overreact?
    DeBondt, DeBondt; Richard, Richard
  • Anomalous price behavior around repurchase tender offers
    Lakonishok, Lakonishok; Theo, Theo

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